Under IAS 2 Inventories, items of inventory that are used by business enterprise as components in a self-constructed property asset are required to be:
A) aggregated into the 'cost of goods sold' expense in the period in which the items are used;
B) expensed directly into equity in the period in which the items are used;
C) capitalised and depreciated;
D) added to a 'property construction' provision account.

Question

Quizplus · Accepted Answer

According to IAS 2, components of self-constructed property assets should be treated as inventory until the property asset is completed. Therefore, the components used should be capitalized as part of the cost of the property asset and depreciated over its useful life. Option C correctly reflects this accounting treatment.

Under IAS 2 Inventories, Items of Inventory That Are Used